INVESTMENT HIGHLIGHTS

• Petronas Chemicals Group Bhd’s (PChem) 4QFY17 earnings expanded by +1.8%yoy to RM1b

• 4QFY17 PUR at 93% as guided due to heavy turnaround activities in PC Methanol Labuan

• Average product prices increased on strengthening global crude oil prices

• Overall group FY17 plant utilisation rate at 91%

• FY17 dividend declared 27sen – highest ever

• Maintain BUY with revised TP of RM8.72 per share

Higher ASP and volume buoyed earnings. PChems’ 4QFY17 earnings increased by +1.8%yoy to RM1.0b. The commendable profit is premised on strong revenue growth of +20.1%yoy to RM4.7b – highest ever achieved in a quarter. The upbeat sales figures are a result of: (i) strong sales volume growth of +11%yoy (boosted by SAMUR) and; (ii) higher average selling prices (ASP). The growth in revenue was however undeterred by weaker USD. Sales volume grew by +11%yoy to 10,136MT for FY17 compared with 9,165MT in FY16.

Earnings within estimates. Cumulative FY17 earnings of RM4.2b came in within our estimates accounting for 101.1% of our FY17 earnings forecasts, but exceeded consensus estimates by a variance of more than +6.5%. Overall PATAMI margin expanded by +2.8ppts to 24.0%.

Olefins & derivatives. FY17 segment revenue and profit increased by +16.4%yoy and by +28.3%yoy respectively. This is despite the company recording lower segment PUR of 94% compared with that of FY16 at 100% due to higher turnaround activity at the derivatives and MTBE plants. ASPs were firmer due to sustainably strong global crude oil prices. O&D derivatives market is expected to remain upbeat in the near term from higher feedstock prices, owing to supply limitations and robust demand. FY17 segment profit margin expanded by +2.3%ppts to 24.4%.

Fertilisers & Methanol. Similar to the O&D segment, both revenue and profit staged commendable growths of +45.9%yoy and +61.1%yoy respectively. The growth in sales volume is largely due to the commencement of SAMUR.

Source: MIDF Research - 21 Feb 2018